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Friday, 21 December 2012

Another
Spanish newspaper, El Confidencial, were kind enough to interview me on
the global and european crisis, on the occasion of the Global Minotaur‘s Spanish translation-edition. Here is the interview, in English (the actual article will appear in Spanish, of course). Read on…

Click images above for information on Yanis' acclaimed book "The Global Minotaur"

Before the crisis, Wall Street had
grown so much, but the productive sector expanded more slowly. Now,
after the financial crisis, are we going to see industry grow, instead
of the financial sector? Or will we see just the opposite?

Rapid, unregulated growth is usually
built on the back of a financial sector bubble; also known as irrational
exuberance. Credit expands fast, increasingly risky bets are placed and
a portion of this is channelled into productive investments in industry
(the real economy, as you put it). Then the bubble bursts, liquidity
disappears and the real economy entered a vicious cycle, of having to
pay back unsustainable debts through austerity that causes investment to
plummet, debt-to-income ratios to remain prohibitively high and, alas,
growth to turn increasingly negative. In this sense, the answer to your
question is bleak: No, there is no guarantee that industry will grow
faster than the financial sector now. In fact, quite the opposite: Since
governments and central banks are financing the banks, to refloat them,
the financial sector is in the process to recovering, and growing
again, while at the same time the real economy is continuing to shrink.
Especially in the Periphery of the Eurozone where the impossibility of
devaluation, coupled with the disproportionate burden of adjustment
falling on the deficit countries, guarantees a depression. This is
precisely what is meant by the trap of negative growth and high debt. It
is a phenomenon that we first encountered in the 1930s, from which
Europe seems to have learned almost nothing.

What has been the role played by economists in this crisis? Are they some kind of new priests?

Economics, as a discipline, is a paradox
wrapped up in a contradiction. The more irrelevant its models the
greater the profession’s discursive success and, thus, social power.
From the 1970s onwards, economics departments were taken over by a
particularly narrow-minded quest for ‘solved’ mathematical models of the
economy – including of finance. But to ‘solve’ our mathematical models,
economists had to impose (often without stating) hidden assumptions
which guaranteed that these models had nothing whatsoever to do with
really existing capitalism. Yet, these very mathematical models could be
used by financiers and politicians to provide a veneer of
respectability to their policies and derivative trades (since the models
effectively assumed, in order to be solved, that financialised
capitalism is immune to crises). Thus economists were popular (and well
rewarded by the financial sector and neoliberal governments) for having
produced models that were, by design, irrelevant. This is why I refer to
economics as a major contradiction; a most peculiar failure: It is the
only discipline whose power is proportional to its theoretical failure
to illuminate capitalism. And yes, it is a priesthood of sorts, in the
sense that young graduates do well in the economics profession if they
learn how to set up and solve these mathematical models ritualistically,
accepting in the process that they will never have anything useful to
say about the real world.

Politicians and officials like
Lagarde say that a USA economic problem would seriously affect
everyone. Does it mean that the flow of money into Wall Street should
keep coming and the international institutions are going to do
everything to make sure it stays that way?

The political elites have already
accomplished this. Wall Street, the City of London and Frankfurt are,
once more, awash with money. The tragedy is that, unlike what was
happening in the pre-2008 era, this capital is failing to bolster
investment and consumer demand, the result being a major deficiency of
effective demand worldwide. Thus the crisis of the real economy
perseveres.

Have the national governments some
chance to make policies against the mainstream global economic policies
and the interests of investment funds?

Not our governments, not within the
Eurozone. Once our states became insolvent, after the Crisis spread its
wings to the Eurozone, national investment policies are severely
restricted in scope. What we now need to do is focus on shaping a
progressive rational investment strategy at the European level. The
European Investment Bank and the European Investment Fund must play a
major role here and Spain ought to lead in their conversion into the
pillars of European growth and development.

Why was there so much consensus in
implementing the economic policies that led us to the crisis? Why did no
one object against them?

While financialisation was building up
incredible pyramids of toxic money, it was almost impossible for our
voices to be heard over the din of all this private money making. Those
who did object were silenced. It took the catastrophe of 2008 for the
voice of reason to be given a modicum of a chance.

Why, after the crisis, are the governments still implementing similar economic policies to what they did before the crisis?

Because they are co-opted to what I call
Bankruptocracy; a new regime that emerged after 2008, where the power
to exploit society’s surpluses has passed on to the bankrupt bankers, in
direct proportion to the black hole they burnt into their banks!

What will be the medium-term future
of Greece in the context of sovereign debt crisis? And the future of
Spain? What kind of life can expect to live as southern European
citizens?

I am tempted to reply using Thomas
Hobbes’ expression; that our lives will be “brutish, nasty and short”.
Only, they will not be short. Just brutish and nasty, as the vicious
cycle of recession-austerity-debt-more austerity-depression unfolds.
Until and unless, of course, our governments do the only thing they can:
Stand up to our northern partners, in some EU Summit, and simply say
‘No!’

Without China’s growth, there
wouldn’t have been growth in South America or Africa. What is going to
be the role of China from now on?

Chinese growth is unsustainable without a
recovery in the United States which, in turn, relies heavily on a
European recovery. At the same time, Latin American, South African and
Indian growth relies entirely on Chinese growth. This is why Europe’s
silliness, which has created an unnecessary and utterly avoidable
recession in the Eurozone, is so detrimental to the planet’s well being.

You say that the crisis is the
laboratory of history, and conformity is the main driving force. I think
conformity still prevails, despite all that has happened. Do you see
any signs of change?

Only a few. I see some welcome change of
heart and mind within the International Monetary Fund and a new sense
of purpose in the US Treasury. But nothing, so far, that might signal a
decisive U-turn.

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